Mylan in India's biggest pharmaceutical takeover as it enters the Matrix
(€573.4m) to acquire a controlling stake in Matrix, an Indian
manufacturer of active pharmaceutical ingredients (APIs) and solid
oral dosage forms, as relentless competition continues to fuel
consolidation in the generic industry.
The fourth largest provider of generic drugs in the US decided to purchase up to 71.5 per cent of Matrix in order to expand its manufacturing platform, obtain a presence in key markets, such as India and China, and tap into local technical expertise, particularly when it comes to the production of generic biologics.
Indeed, to compete in an industry where scale is crucial, generic drug firms have been hot on the acquisition trail; Novartis last year bought Hexal and its US affiliate Eon Labs, Teva bough Ivax Corporation in January, while Barr earlier this month made a $2.3bn bid for Pliva.
By combining Matrix' API and drug development business with its expertise in finished dosage forms, Mylan hopes to slash operating costs and pursue a broader portfolio of products.
However, Mylan spokesman Patrick Fitzgerald stressed to In-PharmaTechnologist.com that, despite India's low labour costs and skilled talent pool, the company will not be offshoring the manufacturing of its drugs from the US to the subcontinent but rather use the new facilities for products it will launch and those that are already made in India.
"We have been expanding our solid oral dose facility in West Virginia and feel that our manufacturing operations at home are very efficient, there is no reason for us to move them," he said.
"What we will be doing is source our APIs from Matrix and also expand our high-barrier-to-entry product capabilities - Matrix is the world's largest supplier of generic anti-retroviral APIs and will allow us to be a leader in HIV medications."
In fact, Matrix is the world's second largest API player, at least as far as its number of drug master files (DMFs) is concerned, with over 165 APIs in the market or under development, and 10 API and pharmaceutical intermediate manufacturing facilities, six of which are approved by the US Food and Drug Administration (FDA).
As for Matrix' finished dosage form pipeline, this, according to Fitzgerald, is relatively small and will complement rather than clash with Mylan's portfolio. The firm's capacity on the other hand will be of great use, as it can manufacture 2bn tablets and 300m capsules on a two-shift basis.
What is more, as part of the takeover, Mylan will also get Matrix' European subsidiary, Docpharma, a leading marketer of branded generics in Belgium, the Netherlands and Luxembourg, offering a platform for building a larger European presence.
Nevertheless, many financial analysts have suggested that, by valuing Matrix at more than $1bn, Mylan may have splashed out too much, paying 22 times the company's expected earnings, considerably up from the Indian drugs sector average of 18.
Still, Mylan has defended the deal, which is expected to close in the fourth quarter of 2006, saying it will be funded using its existing revolving credit facility and cash on hand.
There are also concerns about how a drug company which produces and markets products just in the US will cope with suddenly turning into a global player with 5,100 employees in ten countries.
But clearly Mylan feels this acquisition is a risk it has to take if it is to keep up with its competitors.
